SEC Settles Investigation of Krispy Kreme

Formerly a darling of the stock market…A stock that once traded at more than $50 fell to about $4 in 2006… shares were $1.12, down 2.6%, in after-hours trading. The stock price has fallen 79% in the past nine months.

http://online.wsj.com
March 4, 2009

SEC Settles Investigation of Krispy Kreme
Kathy Shwiff

The Securities and Exchange Commission settled an investigation of Krispy Kreme Doughnuts Inc. begun in 2004, and three former executives agreed to pay a total of $150,000 in fines and $632,919 in ill-gotten gains and interest.

Neither the doughnut company nor the executives admitted any wrongdoing. The agency didn't require Krispy Kreme to pay any money or impose other sanctions.

"Today, we can finally close the book on this investigation into the events that occurred under former Krispy Kreme management," General Counsel Darryl R. Marsch said, referring to the company's agreement with the SEC.

The SEC accused former Chief Executive Scott A. Livengood, former Chief Operating Officer John W. Tate and former Chief Financial Officer Randy S. Casstevens of inflating earnings in 2003 and 2004 and failing to disclose accounting tricks used to make it appear that the company was beating its guidance by 1 cent a share.

The men agreed to repay money they made from trading company stock.

Formerly a darling of the stock market, Krispy Kreme stumbled badly in 2004 as the company expanded during the height of the low-carbohydrate diet craze.

While sales were slipping, Krispy Kreme executives were busy sorting out an accounting mess. A stock that once traded at more than $50 fell to about $4 in 2006, and the company's board ousted two former executives it concluded were trying to "manage earnings" to meet Wall Street's expectations.

In 2007, the company filed its last overdue financial statement, bringing it up to date in its reporting obligations with the SEC.

Krispy Kreme's shares were $1.12, down 2.6%, in after-hours trading. The stock price has fallen 79% in the past nine months.

Write to Kathy Shwiff at moc.senojwod|ffiwhs.yhtak#moc.senojwod|ffiwhs.yhtak

http://online.wsj.com/article/SB123620738432933661.html#articleTabs%3Darticle


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